Modi sticks to failed recipe in India's food-inflation fight

A fourfold rise in prices since early June has made the essential ingredient in Indian curries and sauces a luxury she can no longer afford.

"Buying tomatoes feels like buying jewellery," says the 29-year-old maid, who is struggling to make ends meet on her monthly pay of $l65 as prices for fresh staples such as onions and potatoes also soar in New Delhi.

Modi sticks to failed recipe in India's food-inflation fight

So far, the cash-strapped government has committed to invest less than one-tenth of the amount it estimates is needed to fix India's cold supply chain.

It opposes the entry of foreign supermarket giants who might set up their own logistics.

Its only innovation, a food price stabilisation fund, is at $82 million derided as too tiny to make any difference in feeding the country's 1.2 billion people.

Economists who had backed Modi to put Asia's third largest economy back on track are already expressing unease at the government's failure to lay out a credible inflation strategy, beyond short-term improvisation.

Modi's approach is that of a 'district collector' rather than a structural reformer, said Rajiv Kumar, a senior fellow at the privately-funded Centre for Policy Research in New Delhi.

The reference is to India's army of low-level officials whose role -- dating to British colonial rule -- includes being a local tax man and administrator.

"This is my fear about this government - that it is being captured by the bureaucrats," Kumar says. "Competition is the best short-term guarantee to reduce prices."

Modi sticks to failed recipe in India's food-inflation fight

Officials privately concede that inward investment in multi-brand retail would help revamp an archaic distribution system that forces farmers to sell at regulated markets where middlemen command hefty markups.

India is the world's second-biggest producer of fruit and vegetables after China, but it battles chronic shortages as an estimated 18 percent of the crop goes waste every year due to inadequate cold storage and refrigerated transport facilities.

New Delhi estimates it needs to invest $9 billion in the cold supply chain by March 2016 to handle growing output of fruit and vegetables.

That is more than 10 times the $822 million allocated in Modi's maiden budget last month, and far more than the government can afford.

Modi sticks to failed recipe in India's food-inflation fight

"That's the situation which this government faces as much as the previous government," Sen told Reuters.

A senior official in the Modi administration defended its inflation approach, saying prices would have risen even more quickly if the government had not taken prompt action as recent extreme heat and dry weather stoked food supply fears.

"We all know the long-term solutions, but they will not solve the problem overnight," he said.

"At the moment, administrative measures are the only recourse."

Image: A senior official in the Modi administration defended its inflation approach, saying prices would have risen even more quickly if the government had not taken prompt action as recent extreme heat and dry weather stoked food supply fears.Photographs: Reuters